Difference between Time Rate and Piece Rate System of Wage Payment

This article will help you to differentiate between time rate and piece rate system of wage payment.

Difference # Time-Rate System:

1. Time rate system guarantees wages to workers on the basis of time; irrespective of production done by them during the wage-period.

As such, it fails to discriminate between the efficient worker and the inefficient one.

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Efficiency of worker is low under this system; as workers have a tendency to do minimum work. (D)

2. Quality of work is better under this system; as workers are in no hurry to speed up production. They have full chance to demonstrate their craftsmanship. (A)

3. There is lesser wastage of raw- materials, better handling of machines under this system, and consequently there are lesser chances of industrial accidents; as workers are in no hurry to speed up production. (A)

4. There is a need for strict supervision over workers; so that they do not while away their time. (D)

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5. This system promises economic security to workers; as wages are guaranteed to them. (A)

6. There is stability of labour force; because workers may not like to move out of the organisation – specially when handsome wages on time basis are guaranteed to them. (A)

7. Labour unions prefer this system of wage payment; as workers are guaranteed wages on time-basis; and management cannot discriminate among workers while calculating wages for similar category of workers. As such, industrial relations are also good under this system.

8. As similar categories of workers get similar wages on time bound basis; there are no internal jealousies among workers. Therefore, human relations are good in the organisation. (A)

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9. Settlement problems about wage- fixation are minimum; once proper job-evaluation has been done. (A)

10. Record-keeping of work done by workers, is not required, under this system. This saves time and money of the organisation. (A)

Difference # Piece-Rate System:

1. Piece-rate system promises wages to workers on the basis of production done by them. As such it discriminates between the efficient and the inefficient worker; as the latter get lower wages. Under this system efficiency of worker is high as workers try to produce more and more, to claim higher wages. (A)

2. Quality of work is rather poor under this system; as workers are in a hurry to speed up production – to claim higher wages. As a matter of fact, workers, pay minimum attention to the qualitative aspects of work. (D)

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3. There is a greater wastage of raw-materials, careless handling of machines under this system; and consequen­tly there are more chances of industrial accidents; as workers are in a hurry to speed up production. (D)

4. There is no need for supervision over workers; as the system of wage payment makes them self-starters. (A)

5. There is no economic security to workers; and they have to suffer in financial terms; if they are not able to produce according to their capacity, for any reason whatsoever. (D)

6. There is lesser stability of labour force; as workers might be tempted to move to other organizations; if they find better chances of earning elsewhere. (D)

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7. Labour unions dislike this system of wages payment; as workers are not guaranteed wages; and management can discriminate among workers while calculating wages for similar category of workers. As such, industrial relations are tense under this system. (D)

8. Similar workers get different wage payments; depending on their capacity to produce. As such, there are internal jealousies among workers. Therefore, human relations are not good in the organisation. (D)

9. There are disputes over settlement of issues having a bearing on wage-calculations, like standard production, standard time, piece-rate per unit etc. (D)

10. It is necessary to keep records of work done by workers, for calculation of wages. This requires keeping of additional staff for this purpose; entailing expenditure of time and money of the organisation. (D)